Nigeria Daily. UBA Q4 results. Why GDP re-basing matters. Daily. Nigeria 20 January 2014

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1 UBA Q4 results Nigeria 20 January 2014 Daily Market Update Why GDP re-basing matters Comment on recent news this page Today s headlines page two Recommendations and valuations page three 1 year 31 Dec day NSE - Index* , naira / US$ Brent, US$/bbl MPR % Source: Nigerian Stock Exchange, Central Bank of Nigeria, Bloomberg. *Nigerian Stock Exchange All- Share Index. GDP figures to give a better picture of growth Local newspapers are once again carrying stories about Nigeria s GDP re-basing, which tend to get ignored since the results have already been delayed more times than we can count. However, having collected the data in Q (we witnessed the exercise underway) and then having submitted to the IMF for verification, we think the new data series is not far away. In addition to increasing the overall size of GDP and its composition aspects of the exercise which are well understood at this point the new data is likely to give us a more accurate picture the real GDP growth rate and its drivers. As shown in the chart below, the combination of an outdated base year and high inflation means that authorities are now deflating the nominal GDP data by a factor of nearly 5,000 to arrive at the real data (and growth rates). Nominal & real GDP data series, Nbn 50,000 40,000 30,000 20,000 10,000 Nominal GDP (Nbn) Real GDP (Nbn) Source: National Bureau of Statistics (NBS) Implicit 2013 deflator = 4,940 The implication is that if the deflator were off by just 5% entirely feasible, given effect of compounding over 23 years then Nigeria s apparent real GDP growth rate would drop to below from 6.8% y/y for Q1-Q to under 2.0%. Of course we are not arguing that growth is actually under 2.0%, but the potential for such inaccuracies exists when a old base year is used. Contact information Head of Research: Guy Czartoryski +234 (0) ext.4515 guy.czartoryski@firstcitygroup.com Economist: Alan Cameron +44 (0) alan.cameron@fcmbuk.com Oil & Gas: David Stedman +44 (0) david.stedman@fcmbuk.com Banks: Gloria Obayagbo +234 (0) ext.4516 gloria.obayagbo@firstcitygroup.com Brewers & Flour Millers: Adedayo Ayeni +234 (0) ext.4511 adedayo.ayeni@firstcitygroup.com Consumer: Tayo Oyegunle +234 (0) ext.4505 oyegunle.omotayo@firstcitygroup.com Sales: Temi Popoola, CFA +234 (0) temi.popoola@firstcitygroup.com Trading : John Gannon +44 (0) john.gannon@fcmbuk.com Trading : Kenneth Kanebi +234 (0) ext.4520 kenneth.kanebi@firstcitygroup.com Research Team: cslresearch@firstcitygroup.com Sales Team: cslrmt@firstcitygroup.com CSL STOCKBROKERS LTD

2 Today s news headlines: CNOOC and Gas group plan US$200m investment in Nigeria: The China National Offshore Oil Corporation Energy Group (CNOOC) and the Gas Group, an emerging multinational oil and gas service group, have hinted at plans to invest over US$200m in the Nigerian oil and gas industry. Gliffeth Wonuigwe, the Group Chief Executive Officer of Gas Group stated that the joint venture had already invested US$50m in the development of oil field related tools and plans to inject an additional US$150m in down hole tools, logistics trucks, and a rig assembly plant. Source: Source: thisdaylive.com SEC issues new directive on auditors report: The Securities and Exchange Commission (SEC) has directed that any document prepared by auditors on behalf of any capital market operator must be signed by a named auditor/partner of the auditing firm using his/her personal signature and not the signature of the audit firm. Source: thisdaylive.com Gas shortage threatens take-off of Transitional Electricity Market: According to local media, there are indications that the persistent shortage of gas supply to the various power generating plants across the country may threaten plans by the government to launch the Transitional Electricity Market (TEM) by 1 March, Under the TEM arrangement, the Nigerian Gas Company, a subsidiary of the Nigerian National Petroleum Corporation, is subject to sanction in the event that it fails to deliver on its gas supply commitments to the power producers, in line with the Gas Supply Agreement signed in In related news, the Nigerian Electricity Regulatory Commission has said it expects electricity generation and distribution rise to about 7,000 megawatts (MW) by the end of the year. Source: thisdaylive.com Page 2

3 BANKING RATING Price Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e P/BV 2012 P/BV 2013e P/BV 2014e YIELD FY 2013e YIELD FY 2014e Year End ACCESS Hold % 218, % 11.5% Dec DIAMONDBANK Buy % 114, % 8.2% Dec FBN HOLDINGS Hold % 525, % 8.7% Dec FIDELITYBANK Buy % 73, % 15.4% Dec GT BANK Hold % 838, % 6.6% Dec SKYEBANK Hold % 58, % 11.8% Dec STANBIC IBTC Hold % 220, % 4.3% Dec STERLING BANK Hold % 38, % 8.3% Dec UBA Buy % 294, % 9.9% Dec ZENITH BANK Hold % 788, % 7.2% Dec EV/EBITDA EV/EBITDA (x) EV/EBITDA (x) RATING Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e (x) e FY 2014e YIELD FY 2013e YIELD FY 2014e Year End CEMENT DANGOTE CEMENT Buy % 3,919, % 1.7% Dec LAFARGE WAPCO Hold % 345, % 2.9% Dec EV/EBITDA EV/EBITDA (x) EV/EBITDA (x) RATING Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e (x) e FY 2014e YIELD FY 2013e YIELD FY 2014e Year End CONSUMERS CADBURY NIGERIA Sell % 182, % 2.2% Dec UNILEVER NIGERIA Sell % 202, % 2.4% Dec NESTLE NIGERIA Hold 1, % 923, % 2.5% Dec PZ CUSSONS NIGERIA Hold % 151, % 1.6% May GLAXOSMITHKLINE Buy % 65, % 2.9% Dec UACN Buy % 112, % 3.3% Dec EV/EBITDA EV/EBITDA (x) EV/EBITDA (x) RATING Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e (x) e FY 2014e YIELD FY 2013e YIELD FY 2014e Year End BREWERIES NIGERIAN BREWERIES Sell % 1,249, % 2.0% Dec GUINNESS NIGERIA Sell % 358, % 2.0% June INTER. BREW Hold % 94, % 1.6% Mar EV/EBITDA EV/EBITDA (x) EV/EBITDA (x) RATING Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e (x) e FY 2014e YIELD FY 2013e YIELD FY 2014e Year End AGRICULTURE OKOMUOIL Buy % 42, % 6.6% Dec PRESCO Buy % 41, % 1.6% Dec FOOD PROCESSING EV/EBITDA EV/EBITDA (x) EV/EBITDA (x) RATING Target Price diff % Mkt Cap (N'm) EPS 2012 EPS 2013e EPS 2014e EPS 2015e PE (x) 2012 PE (x) 2013e PE (x) 2014e PE(x)2015e (x) e FY 2014e YIELD FY 2013e YIELD FY 2014e Year End DANGOTE SUGAR Sell % 146, % 4.9% Dec FOOD PROCESSING RATING Target Price diff % Mkt Cap (N'm) EPS 2013 EPS 2014e EPS 2015e EPS 2016e PE (x) 2013 PE (x) 2014e PE (x) 2015e PE(x)2016e EV/EBITDA (x) 2013 EV/EBITDA (x) 2014e EV/EBITDA (x) FY 2015e YIELD FY 2013e YIELD FY 2014e Year End FLOUR MILLS Buy % 209, % 2.8% Mar HONEYWELL FLOUR Buy % 31, % 4.6% Mar Page 3

4 Analyst Certification Each research analyst(s) principally responsible for the preparation and content of all or any identified portion of this research report hereby certifies that all of the views expressed in this research report accurately reflect their personal views about those issuer(s) or securities that the research analyst covers in this research report. Each research analyst(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific (s) or view(s) expressed by that research analyst in this research report. Important disclosures Ratings and Target Price History Access Bank Price 1-Feb n/a 12.2 n/a Hold 5-Apr Hold Hold 16-Aug Hold Hold 29-Aug Hold Hold 31-Oct Hold Hold Diamond Bank Price 27-Aug n/a 3.9 n/a Buy 29-Oct Buy Buy 10-Apr Buy Buy 8-Aug Buy Buy 7-Oct Buy Buy 30-Oct Buy Buy FBN Holdings Price 14-Nov n/a 17.8 n/a Buy 1-Feb Buy Hold 2-May Hold Hold 24-May Hold Hold 29-Aug Hold Hold 10-Jan Hold Hold Guaranty Trust Bank Price 1-Feb n/a 25.8 n/a Hold 15-Apr Hold Hold Page 4

5 28-Aug Hold Hold 25-Oct Hold Hold UBA Price 1-Feb n/a 8.2 n/a Buy 21-May Buy Buy 7-Aug Buy Buy 1-Aug Buy Buy 1-Nov Buy Buy Zenith Bank Price 1-Feb n/a 17.5 n/a Sell 26-Apr Sell Hold 23-Aug Hold Hold 28-Oct Hold Hold StanbicIBTC Price 7-Oct n/a 15.5 n/a Hold 30-Oct Hold Hold 18-Dec Hold Hold Fidelity Bank Price 7-Oct n/a 4.1 n/a Buy 31-Oct Buy Buy Sterling Bank Price 7-Oct n/a 5.0 n/a Hold 30-Oct Hold Hold Page 5

6 Skye Bank Price 7-Oct n/a 5.0 n/a Hold 30-Oct Hold Hold Ashaka Cement Price 22-Mar n/a 26.4 n/a Hold 13-May Hold Hold Dangote Cement Price 17-Jan Buy Buy 2-Apr Buy Hold 17-Apr Hold Hold 23-May Hold Hold 7-Aug Hold Hold Guinness Nigeria Price 13-Feb Sell Hold 13-May Hold Hold 27-Jun Hold Hold 28-Jun Hold Hold 22-Nov Hold Sell International Breweries Price 25-Jan n/a n/a n/a n/a 21-Feb n/a n/a n/a n/a 3-Jun n/a 35.7 n/a Buy 25-Jun Buy Buy 14-Aug Buy Hold 5-Nov Hold Hold 21-Nov Hold Hold 10-Jan Hold Hold Page 6

7 Nigerian Breweries Price 27-Feb Sell Hold 6-May Hold Hold 25-Jun Hold Hold 18-Jul Hold Sell 24-Oct Sell Sell 29-Nov Sell Sell Flour Mills of Nigeria Price 12-Feb Buy Buy 24-Jun Buy Buy 29-Jul Buy Buy 19-Sep Buy Buy 1-Nov Buy Buy 19-Dec Buy Buy Dangote Sugar Refinery Price 15-Jan n/a 9.9 n/a Buy 19-Apr Buy Hold 10-May Hold Hold 27-Jul Hold Sell 29-Oct Hold Sell 29-Jul Sell Sell 15-Jan Sell Sell PZ Cussons Nigeria Price 12-Dec Buy Sell 31-Jan Sell Sell 17-Apr Sell Sell 19-Aug Sell Hold 23-Oct Hold Hold Unilever Nigeria Price 4-Apr Hold Sell 25-Apr Sell Sell 19-Jul Sell Sell 23-Oct Sell Sell Page 7

8 19-Dec Sell Sell UAC of Nigeria Price 21-Nov n/a 55.0 n/a Buy 13-May Buy Hold 3-Jul Hold Buy 7-Aug Buy Buy 28-Oct Buy Buy Nestle Nigeria Price 19-Dec n/a n/a Hold 21-Feb Hold Hold 7-May Hold Hold 29-Jul Hold Hold 31-Oct Hold Hold Cadbury Nigeria Price 18-Feb n/a 29.6 n/a Sell 2-Apr Sell Sell 30-Jul Sell Sell 30-Oct Sell Sell 16-Jan Sell Sell Honeywell Flour Price 28-Mar n/a 4.3 n/a Buy 24-Jun Buy Buy 23-Jul Buy Buy 20-Dec Buy Buy Presco Price 17-Jun n/a 69.6 n/a Buy 8-May Buy Buy 1-Nov Buy Buy Page 8

9 Okomu Oil Palm Price 26-Jun n/a 59.2 n/a Buy 23-Jul Buy Buy 5-Dec Buy Buy GSK Nigeria Price 10-Oct n/a 78.6 n/a Buy 8-May Buy Buy Analysts' compensation is based upon activities and services intended to benefit the investor clients of FCMB (UK) Limited and the affiliates of First City Group, Lagos, Nigeria ( the Group ). Analysts receive compensation that is impacted by overall profitability of the Group, which includes revenues from, among other business units, Institutional Sales and Trading and Capital Markets/Investment Banking. CSL Research Ratings Distribution Buy Hold Sell Not Rated Total Coverage universe % distribution 37% 44% 19% 0% Investment banking clients % distribution 50% 0% 50% 0% Explanation of CSL Research's equity research rating system Buy: Hold: Sell: Not Rated: Benchmark: Price targets: Asset allocation: The analyst expects the stock to outperform the Benchmark over the next 12 months or the stated investment horizon. The analyst expects the stock to perform in line with the Benchmark over the next 12 months or the stated investment horizon. The analyst expects the stock to underperform the Benchmark over the next 12 months or the stated investment horizon. The rating and price target have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when FCMB UK or the Group is acting in an advisory capacity in a merger or strategic transaction involving the company or due to factors which limits the analysts ability to provide forecasts for the company in question. The benchmark is the trailing three year average yield of the 12 month T-Bill plus one standard deviation rounded to the nearest percent. Price targets, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any price target may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings fall short of estimates. Asset allocation is the responsibility of the strategy team. The recommended weight (Buy, Hold and Sell) for equities, cash and fixed income instruments is based on a number of metrics and does not relate to a particular size change in one variable. Page 9

10 Other disclosures A. The analyst(s) responsible for the preparation and content of this report (as shown on the front page of this report) holds personal positions in a class of common equity securities of the company. B. The company beneficially owns more than 5% in FCMB UK or First City Group ( the Group ). C. FCMB UK or the Group is a market maker in the publicly traded equity securities of the company. D. FCMB UK or the Group beneficially owns 1% or more of the equity securities of the company. E. FCMB UK or the Group beneficially holds a significant interest of the debt of the company. F. FCMB UK or the Group has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed offer of securities of the company. G. The company is a client of the investment banking division of the Group. H. FCMB UK or the Group has lead managed or co-lead managed a public offering of the securities of the company within the last 12 months. I. FCMB UK or the Group has received compensation for investment banking services from the company within the last 12 months. J. FCMB UK or the Group expects to receive, or intends to seek, compensation for investment banking services from the company during the next 3 months. Companies from which FCMB UK or the Group s investment banking division has received compensation in the last 12 months Buy Hold Sell Not Rated Total % distribution 100% 0% 0% 0% Page 10

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